An acquaintance of mine, at 92, still lives a throwback lifestyle. Sharp as a tack. A recent visit to a doctor had her prescription sent to "the corner pharmacy" which delivered it early that evening. They added the charge to her bill, which she settles up at the end of the month.
(She found surimi in and among her shrimp in a salad and her notice of it has led to this particular store banning all surimi in all instances. "Surimi is not shrimp." "Yes, ma'am." The last dozen visits has been the occasion of a dozen reminders. Truth in advertising is maintained by a 92 year old.)
Now think about that, and compare it to your doctor visit. Do you argue with the doctors, and make them back up their diagnosis with science? If a prescription is needed, is that information communicated to your corner pharmacy which in turns delivers it to you home, and then bills you? And you pay up at the end of the month?
No, if you are typical, someone you don't know says things about you quickly and leaves you not sure about your condition, or at best hopeful. Then you have to make time to stand in line somewhere to get your prescription filled, or try to save money by going to Walmart or Costco or some place. And here again, someone who does not know you is filling that prescription.
Her pharmacist knows her personally, and will advise her even more fully than the doctor. Her pharmacist exists still, one of those gift-shop in the front, pills in the back shops, that were in every neighborhood in my youth, largely because they are a "compounding pharmacy." Pharmacists are free to make any drug they want, and compounding pharmacists do so from scratch when needed.
Most doctors are getting a cut of the prescription action, one way or another, from big pharm, and most pharmacists are simply filling that prescription. Ka-ching! But if pressed, doctors can change the formula, and compounding pharmacists can make that up. And do. And 50 years ago, this was true of almost all pharmacists.
What changed is banks learned they could lend asset-less backed credit to any and all. With this credit with no rational limits, they needed to find a market for it. Consumers!
My twenties I regularly received credit cards, loaded with credit, ready to use, unsolicited in the mail. I believe by 1980 I had some fifty credit cards of various styles. At the time airlines had their own internal systems, but eventually they found they could switch to United Air Lines Visa, dump their operations, and make more money brokering visa than running their own.
All of this allowed concentration of credit-extension farther and farther away form the transaction, the community, with more and more centralization of transaction, and the ability of the hegemon to peek in on who was spending what with more and more specificity. Taxing became easier. Match this massive data flow with computers, and the Center could more and more spot trends and predict outcomes ever further from the transaction. FICO thrived. Get big or get out was actualized. Safeway for food, Gap for clothes, Ikea for furniture, CVS/romneycare for medicine, NFL for entertainment, Fox for info, Ferguson for law enforcement, 9-11 for defense, Comcast for utilities, ad nauseum. The more the centralization the further from accountability to the customer.
Two generations believe their fundamental relationship in the economy is with a bank, instead of the stores one patronizes, and your status is determined by a credit score. You pay interest depending on your credit score.
Dave Ramsey is anti-debt, and has become a multi-millionaire out of bankruptcy preaching anti-usury, yet he has to give into his audience wanting to buy a home on credit. So if people take his advice on the one hand and get rid of credit card debt, then they run into a problem on the other, no credit score to get a loan. Such are called the unscorable.
In another place Ramsey notes (and even big banks will do this) a practice called a manual mortgage, in which they study your circumstances based on local experience. he may not know this, but in banks it is called a "portfolio loan." That is to say, the bank is keeping the risk on the books, instead of acting as a broker and passing the loan risk off to taxpayers via Fannie and Freddie (which just last week again lowered their standards to restart the housing bubble - as I said, there is no rational limit to lending asset-less backed credit) and keeping the profits, the banks can do what all banks in all instances did 40 years ago, and ran the risk and kept the profits. Mortgage bankers knew every customer personally. Not any more.
But to capture the growing group of independent, the usury-free, the banks must return to old practices. But personalization costs more, so will their cheap credit still be so cheap? Will the cost of duplicating what is already known locally about a customer overwhelm the advantage of EZ cheap credit centrally provisioned?
EZ credit at inexpensive interest allows more people to consume than no-interest credit allows. The pharmacist is not going to extend credit to someone he knows cannot pay. There is a pitch-perfect justice in someone who is profligate has that very profligacy checked by the community in which he lives. The community is strengthened by curbing profligacy. Interest free credit builds communities.
With EZ credit at low interest, people tend toward eternal debt. But also deadbeats spend prodigious amounts before they are destitute and cut off. Their selection of goods and services are items that please deadbeats, and this market is so large, whole factories and industries grow up to serve this mal-investment. And once cut off, why, does EZ credit stop? Not at all, they are issued an EBT card in which credit is extended to them with no requirements whatsoever. By failing to meet commitments at usury, they are returned to no usury loans, but there is no community to curb their profligacy.
A downward spiral. Cheap EZ credit destroys communities.
Kentucky Fried Chicken, drug dealers and McDonalds rejoice. The pendulum may be swinging back, since Mickey D saw a 30% cut in profits last quarter since their highly subsidized food is so nasty. McDonalds will try to turn things around by... wait for it... tailoring their menu to local tastes. But if they do, how do they take advantage of the EZ credit subsidized ingredients that makes their model profitable? If they need not buy a billion pounds of reprocessed potato starch to supply the exact same french fries to all locations, and buy a 50 pound sack here, and a 50 pound sack there, how will they compete with a local burger joint whose tiny market for fresh fries is ten times the volume of any one given Micky D unit? Micky D can't have it both ways, mass volume purchase and localized product. If the EZ cheap credit is not advantageous for what one can do with it, for size no longer delivers what enough customers want, then there is for the corporate welfare queen a downward spiral. Just like the EBT set. Cheap EZ credit ruins economies.
One quarter a trend does not make, but it is worth watching.
But with all these movements toward local I think the pendulum is swinging back. People are sick of getting sick from what they eat.
So as you start a business, recall what once was: extractors fronting processors at no-interest credit, processors fronting manufacturers at no interest credit, manufacturers fronting distributors and retailers at no interest, and retailers fronting Larry Lunchbucket at no interest until the end of the month, when the bills were settled up. Larry's $100 got passed back from the retailer, 60 to the distributor, 40 to manufacturer, 10 to processor and 5 to extractor. No banks involved, no interest involved. Now every step is run through the banks because their credit is EZ and the cost seems ot be cheaper than maintaining your own credit monitoring in house.
And indeed, those small businesses could not compete against EZ credit at low cost to consumer vs credit monitoring of the market at no cost to the consumer. But, in a mere forth years, the goods and services called forth by the putative winners of this regime, corporate and private welfare, no longer match the needs. With no real feedback loop except "cheaper" what range of goods and services narrowed over time and through malinvestment and misallocation no longer meet consumer demand to the degree that the economy is stagnant, and six years in has shown no improvement. This is scary to those picked as winner in this regime.
And those who realize what is up look to gold as a hedge. Very good. In times of economic distress, gold is king, it is money that will extinguish debts, and call forth goods and services when no one will extend credit (and no one will accept currency as money, since it clearly is not money.)
But, gold and silver, as money, is a medium of exchange. Holding on to it to get to the point where the economy is healed and businesses are again extending credit within their communities is a rational plan. But if things get to that point, you'll have bigger problems than if gold will buy things.
Instead of hedging future fears by hoarding medium of exchange, why not invest that money is a business now, in which you extend credit to your customers, the worthy ones, like the pharmacy down the street, and maybe front-run the pendulum which very well may be swinging back, and find you are not a part of the problem, but part of the solution.
Dump the banks and the EZ cheap credit, and square and etc... build a solid customer-based business, not one based on EZ cheap credit. Be a part of the real economy, not the false economy.
Feel free to forward this by email to three of your friends.
(She found surimi in and among her shrimp in a salad and her notice of it has led to this particular store banning all surimi in all instances. "Surimi is not shrimp." "Yes, ma'am." The last dozen visits has been the occasion of a dozen reminders. Truth in advertising is maintained by a 92 year old.)
Now think about that, and compare it to your doctor visit. Do you argue with the doctors, and make them back up their diagnosis with science? If a prescription is needed, is that information communicated to your corner pharmacy which in turns delivers it to you home, and then bills you? And you pay up at the end of the month?
No, if you are typical, someone you don't know says things about you quickly and leaves you not sure about your condition, or at best hopeful. Then you have to make time to stand in line somewhere to get your prescription filled, or try to save money by going to Walmart or Costco or some place. And here again, someone who does not know you is filling that prescription.
Her pharmacist knows her personally, and will advise her even more fully than the doctor. Her pharmacist exists still, one of those gift-shop in the front, pills in the back shops, that were in every neighborhood in my youth, largely because they are a "compounding pharmacy." Pharmacists are free to make any drug they want, and compounding pharmacists do so from scratch when needed.
Most doctors are getting a cut of the prescription action, one way or another, from big pharm, and most pharmacists are simply filling that prescription. Ka-ching! But if pressed, doctors can change the formula, and compounding pharmacists can make that up. And do. And 50 years ago, this was true of almost all pharmacists.
What changed is banks learned they could lend asset-less backed credit to any and all. With this credit with no rational limits, they needed to find a market for it. Consumers!
My twenties I regularly received credit cards, loaded with credit, ready to use, unsolicited in the mail. I believe by 1980 I had some fifty credit cards of various styles. At the time airlines had their own internal systems, but eventually they found they could switch to United Air Lines Visa, dump their operations, and make more money brokering visa than running their own.
All of this allowed concentration of credit-extension farther and farther away form the transaction, the community, with more and more centralization of transaction, and the ability of the hegemon to peek in on who was spending what with more and more specificity. Taxing became easier. Match this massive data flow with computers, and the Center could more and more spot trends and predict outcomes ever further from the transaction. FICO thrived. Get big or get out was actualized. Safeway for food, Gap for clothes, Ikea for furniture, CVS/romneycare for medicine, NFL for entertainment, Fox for info, Ferguson for law enforcement, 9-11 for defense, Comcast for utilities, ad nauseum. The more the centralization the further from accountability to the customer.
Two generations believe their fundamental relationship in the economy is with a bank, instead of the stores one patronizes, and your status is determined by a credit score. You pay interest depending on your credit score.
Dave Ramsey is anti-debt, and has become a multi-millionaire out of bankruptcy preaching anti-usury, yet he has to give into his audience wanting to buy a home on credit. So if people take his advice on the one hand and get rid of credit card debt, then they run into a problem on the other, no credit score to get a loan. Such are called the unscorable.
One of the side effects—or side benefits—of becoming and living debt free is that you eventually fall off the FICO radar. You become one of the 64 million “unscorable” consumers who haven’t had an active credit account for at least six months and therefore can’t qualify for a mortgage with many lenders.Distraught at losing some potential usury slaves, the bankers come up with a solution.
The unscorable group has grown large enough that it’s getting attention with Experian, Equifax and TransUnion, the three credit bureaus FICO uses to determine its scores. They have developed the VantageScore model that looks at 24 months of credit history instead of six months. It also includes rent and utility payments—even public records when they’re available.What is happening... they are going local for the credit info... decentralized.
In another place Ramsey notes (and even big banks will do this) a practice called a manual mortgage, in which they study your circumstances based on local experience. he may not know this, but in banks it is called a "portfolio loan." That is to say, the bank is keeping the risk on the books, instead of acting as a broker and passing the loan risk off to taxpayers via Fannie and Freddie (which just last week again lowered their standards to restart the housing bubble - as I said, there is no rational limit to lending asset-less backed credit) and keeping the profits, the banks can do what all banks in all instances did 40 years ago, and ran the risk and kept the profits. Mortgage bankers knew every customer personally. Not any more.
But to capture the growing group of independent, the usury-free, the banks must return to old practices. But personalization costs more, so will their cheap credit still be so cheap? Will the cost of duplicating what is already known locally about a customer overwhelm the advantage of EZ cheap credit centrally provisioned?
EZ credit at inexpensive interest allows more people to consume than no-interest credit allows. The pharmacist is not going to extend credit to someone he knows cannot pay. There is a pitch-perfect justice in someone who is profligate has that very profligacy checked by the community in which he lives. The community is strengthened by curbing profligacy. Interest free credit builds communities.
With EZ credit at low interest, people tend toward eternal debt. But also deadbeats spend prodigious amounts before they are destitute and cut off. Their selection of goods and services are items that please deadbeats, and this market is so large, whole factories and industries grow up to serve this mal-investment. And once cut off, why, does EZ credit stop? Not at all, they are issued an EBT card in which credit is extended to them with no requirements whatsoever. By failing to meet commitments at usury, they are returned to no usury loans, but there is no community to curb their profligacy.
A downward spiral. Cheap EZ credit destroys communities.
Kentucky Fried Chicken, drug dealers and McDonalds rejoice. The pendulum may be swinging back, since Mickey D saw a 30% cut in profits last quarter since their highly subsidized food is so nasty. McDonalds will try to turn things around by... wait for it... tailoring their menu to local tastes. But if they do, how do they take advantage of the EZ credit subsidized ingredients that makes their model profitable? If they need not buy a billion pounds of reprocessed potato starch to supply the exact same french fries to all locations, and buy a 50 pound sack here, and a 50 pound sack there, how will they compete with a local burger joint whose tiny market for fresh fries is ten times the volume of any one given Micky D unit? Micky D can't have it both ways, mass volume purchase and localized product. If the EZ cheap credit is not advantageous for what one can do with it, for size no longer delivers what enough customers want, then there is for the corporate welfare queen a downward spiral. Just like the EBT set. Cheap EZ credit ruins economies.
One quarter a trend does not make, but it is worth watching.
But with all these movements toward local I think the pendulum is swinging back. People are sick of getting sick from what they eat.
So as you start a business, recall what once was: extractors fronting processors at no-interest credit, processors fronting manufacturers at no interest credit, manufacturers fronting distributors and retailers at no interest, and retailers fronting Larry Lunchbucket at no interest until the end of the month, when the bills were settled up. Larry's $100 got passed back from the retailer, 60 to the distributor, 40 to manufacturer, 10 to processor and 5 to extractor. No banks involved, no interest involved. Now every step is run through the banks because their credit is EZ and the cost seems ot be cheaper than maintaining your own credit monitoring in house.
And indeed, those small businesses could not compete against EZ credit at low cost to consumer vs credit monitoring of the market at no cost to the consumer. But, in a mere forth years, the goods and services called forth by the putative winners of this regime, corporate and private welfare, no longer match the needs. With no real feedback loop except "cheaper" what range of goods and services narrowed over time and through malinvestment and misallocation no longer meet consumer demand to the degree that the economy is stagnant, and six years in has shown no improvement. This is scary to those picked as winner in this regime.
And those who realize what is up look to gold as a hedge. Very good. In times of economic distress, gold is king, it is money that will extinguish debts, and call forth goods and services when no one will extend credit (and no one will accept currency as money, since it clearly is not money.)
But, gold and silver, as money, is a medium of exchange. Holding on to it to get to the point where the economy is healed and businesses are again extending credit within their communities is a rational plan. But if things get to that point, you'll have bigger problems than if gold will buy things.
Instead of hedging future fears by hoarding medium of exchange, why not invest that money is a business now, in which you extend credit to your customers, the worthy ones, like the pharmacy down the street, and maybe front-run the pendulum which very well may be swinging back, and find you are not a part of the problem, but part of the solution.
Dump the banks and the EZ cheap credit, and square and etc... build a solid customer-based business, not one based on EZ cheap credit. Be a part of the real economy, not the false economy.
Feel free to forward this by email to three of your friends.
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